NAIC Task Force Supports Removal of Agent Commissions from MLRs

Updated July 5, 10:17 a.m.

WASHINGTON—A National Association of Insurance Commissioners task force said it will support House legislation that would remove agent commissions from the medical loss ratio (MLR).

The support came in a conference call Thursday by an NAIC task force formed last November to study the issue. The task force was headed by Florida commissioner Kevin McCarty.

McCarty says, "The purpose of [the proposed House legislation] is to protect the role of health insurance agents in the health insurance delivery process. Consumers must increasingly rely on the expertise of agents to successfully navigate the complex health insurance landscape to ensure that they buy the best product to protect their families; our goal is to protect the role of these professionals, and the invaluable assistance they provide to consumers."

McCarty adds, "It has been six months since the Affordable Care Act’s MLR requirements have become effective. Although much of the evidence to this point is anecdotal, there is an indication that some companies may be having difficulty complying with the new standards. In fact, 13 states have filed MLR waiver requests with the Department of Health and Human Services due to their apprehension that these new standards may destabilize the individual markets in their respective states.

"We are also monitoring a national trend of changes in agent compensation by insurance companies to meet these requirements. This has created a serious concern that lower agent commissions could encourage agents to leave the marketplace precisely when they are needed most."

The National Association of Health Underwriters and the National Association of Professional Insurance Agents voiced strong support for the task force’s decision, and urged the NAIC executive committee to move promptly to support the task force’s conclusions.

Interim regulations issued by the department of Health and Human Services to implement the federal healthcare reform law, classified producer compensation within overall administrative expenses that are limited to 15 percent or 20 percent. Under H.R. 1206, producer compensation would be calculated outside the MLR.

Producer groups have testified that agent commissions have dropped 50 percent this year because of the HHS action implementing the MLR.

Rep. Mike Rogers, R-Mich., primary sponsor of the legislation, said recently at a House hearing that health insurance agents and brokers will continue to be in a "desperate situation" unless Congress acts to change the MLR provision in the HHS regulation.

Many carriers have responded to the HHS regulation by slashing agent and broker compensation by as much as 50 percent, he adds.

Janet Trautwein, NAHU CEO, urges Congress to “heed the recommendations of the NAIC” and pass the House measure and immediately enforcement of the MLR regulation.

"This action is good news for America's health insurance consumers and good news for the Main Street independent insurance agents that consumers rely on," says Leonard Brevik, PIA executive vice president and CEO. “It is incumbent upon the NAIC Executive Committee and the full NAIC membership to embrace without delay this recommendation from the task force they created."

A letter dated June 28 from a coalition of consumer groups, attempts to sway the NAIC committee to support the HHS regulation.

“Data about the extent of commission changes and their causes are inconclusive, suggesting that amending federal law is unwarranted,” the letter reads, adding that “no evidence has been presented to indicate that consumers have lost access to brokers” as a result of the new MLR policy.

The letter says that data presented by NAHU to NAIC’s Health Insurance and Managed Care Committee Regarding Producer Compensation “illustrate that many carriers have not altered commission levels between 2010 and 2011, and some have actually increased commissions.”

The letter also says that the data indicated that, “Widespread reductions across the country and all plans were not apparent.”

“Today a committee of the National Association of Insurance Commissioners acted like a wholly owned subsidiary of the health insurance industry,” Rome says in a statement. “They did exactly what the industry wanted by voting to gut one of most significant provisions of the Affordable Care Act that holds the insurance companies accountable.”

He adds, “The Patient Protection and Affordable Care Act (PPACA) is about protecting small businesses and consumers who have been beaten up and overcharged for decades, but today the NAIC got it backwards.

“It’s repugnant that they would steal $1.3 billion from consumers and small businesses and hand it over to the insurance companies,” Rome says.

According to NAIC staff officials, no date has been set for the next executive committee meeting.